Property investing: key lessons from two decades in real estate

Real estate investors can potentially benefit from the experiences of landlords who’ve been at it a while. Here are five key lessons.

A big anniversary snuck up on me recently and I forgot it.

Luckily it wasn’t a wedding anniversary, which would have caused some angst at home.

It was 20 years of being a real estate investor, making now a good time to reflect on what has worked and what hasn’t.

As a new wave of property investors emerges across Australia – sadly sometimes at the expense of first home buyers – here’s a look at five vital lessons learnt over two decades.

PATIENCE PAYS

House prices are at record highs, inflation pressures are emerging, interest rate rises are coming, and yet people are still piling into real estate.

There’s a good chance prices may dip in the next couple of years, possibly sharply, just as there’s a chance they’ll keep climbing.

This is why one of the most important traits a real estate investor needs is patience. I personally spent four years watching a property’s price go nowhere, and others have waited even longer.

If you hold a good quality house for long enough, it will eventually rise and – as we’ve seen in 2021 – often with spectacular results.

IT’S A BUSINESS DECISION

Emotion is a key factor when buying your own home, but for an investor all that namby-pamby stuff should be pushed aside.

It’s pointless caring about whether you like the colour of the carpets or curtains if you won’t be living in the place. If in doubt, choose neutral colours.

And have a financial strategy from day one, including when you plan to the sell the property and why.

Property investing isn’t a game, but don’t put all your emotions into it.

LANDLORDS SHOW SOME LOVE

Treat an investment property as a business but still have a heart, because a kind landlord will keep good tenants for longer.

Don’t be greedy when it comes to increasing rents, be prompt with requests for maintenance, and consider allowing tenants flexibility such as lease terms that suit them and possibly even pets.

While nasty landlords will still profit it times like these when demand is tight, the tables will turn when the market eventually turns.

LAND AHOY!

A tip I was told more than 15 years ago has always stuck with me: buy stand-alone properties, not apartments.

That’s because land is the component of any property that rises in value over time, and the value of bricks and mortar, fixtures and fittings will fall.

This doesn’t mean every apartment investor in Australia has made a mistake – many enjoy huge gains. But it’s an investment lesson I personally live by.

LOOK BEYOND YOUR BACKYARD

Many people buy their first property investment close to home, sometimes in their own suburb, because it’s an area they know.

That’s a problem on two fronts. Firstly, it’s putting all their investment eggs in one basket and if there’s a downturn in their area they cop a double hit.

Secondly, it’s not exposing them to bigger growth opportunities in other suburbs, cities and states.

My last investment property was bought in another state, and my next one quite possibly will be too. This diversification provides protection from downturns because each state’s real estate market has its own price cycle, and it saves money on state government land tax costs that kick in on property number two.

Originally published as Property investing: key lessons from two decades in real estate